Southern National Bancorp of Virginia, Inc. (NASDAQ:SONA) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 13th of February, you won't be eligible to receive this dividend, when it is paid on the 28th of February.
Southern National Bancorp of Virginia's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Looking at the last 12 months of distributions, Southern National Bancorp of Virginia has a trailing yield of approximately 2.5% on its current stock price of $15.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Southern National Bancorp of Virginia's payout ratio is modest, at just 27% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Southern National Bancorp of Virginia's earnings per share have been growing at 17% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past eight years, Southern National Bancorp of Virginia has increased its dividend at approximately 27% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Should investors buy Southern National Bancorp of Virginia for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Southern National Bancorp of Virginia looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Want to learn more about Southern National Bancorp of Virginia? Here's a visualisation of its historical rate of revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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